SEMINOLE CTY. v. Sanford Court Investors, Ltd.

• Citation: 743 So.2d 1165
• Decision Date: 22 October 1999
• Docket Number: No. 98-1700.,98-1700.
• Parties: SEMINOLE COUNTY, Appellant/Cross-Appellee, v. SANFORD COURT INVESTORS, LTD., et al., Appellees/Cross-Appellants.
• Court: Court of Appeal of Florida (US)

743 So.2d 1165

SEMINOLE COUNTY, Appellant/Cross-Appellee, v. SANFORD COURT INVESTORS, LTD., et al., Appellees/Cross-Appellants.

No. 98-1700.

District Court of Appeal of Florida, Fifth District.

October 22, 1999.

Robert A. McMillan, County Attorney, and Henry M. Brown, Assistant County Attorney, Sanford, for Appellant/Cross-Appellee.

Mark R. Leavitt and Kurt Garber of Wilson, Leavitt & Small, P.A., and Kimberly A. Ashby of Akerman, Senterfitt & Eidson, P.A., Orlando, for Appellees/ Cross-Appellants.

ON MOTION FOR CLARIFICATION

ANTOON, C.J.

After granting appellees' motion to supplement the record on appeal¹ and reviewing the supplemental materials submitted, we withdraw our opinion dated April 30, 1999 and substitute the following opinion in its place.

Seminole County appeals the final judgment entered by the trial court in this eminent domain proceeding challenging the award of business damages to tenants of the property owner. Upon review, we hold that the trial court erroneously permitted the tenants to present expert testimony as to business damages incurred beyond the termination of their leases and the loss of value of personal property. Accordingly, we reverse the final judgment as it pertains to business damages and remand this matter for further proceedings related thereto.

Cumberland Farms (Cumberland) owned a 101,387 square foot parcel of real property located at the corner of Airport Boulevard and Sanford Avenue. Cumberland operated a convenience store and gas station on this property and leased adjoining commercial space to two tenants. Cumberland's tenants were The Hancock Company (Hancock) and Mohammed Deis d/b/a Napoli's Pizza Italian Restaurant (Mr. Deis). Hancock operated a plumbing business and Mr. Deis operated an Italian restaurant. Hancock's original lease expired in December 1994, but allowed for a two-year extension ending in December 1996. Mr. Deis' lease expired June 1995, but he continued to lease the space on a monthly basis.

In February 1994, Seminole County filed a petition in eminent domain seeking to condemn private property for the purpose of widening Sanford Avenue and constructing improved drainage facilities. On April 19, 1994, the trial court entered an order of taking condemning 8,158 square feet of Cumberland's property in fee simple and a small area for a temporary construction easement. The property taken was a strip of land adjacent to Airport Boulevard and Sanford Avenue. As a result of the taking, Cumberland lost twelve parking spaces in front of and beside the convenience store, an air pump station, landscaping, light poles, and signs. Neither the building nor the parking spaces in front of the rental spaces were directly affected by the taking. Both Hancock's lease and Mr. Deis' lease contained the following language relating to eminent domain:

Eminent Domain, Condemnation: If the property or any part thereof wherein the demised premises are located shall be taken by public or quasi-public authority under any power of eminent domain or condemnation, this lease, at the option of the Landlord, shall forthwith terminate and the Tenant shall have no claim or interest in or to any award of damages for such taking.

On May 11, 1994, the County made its good faith deposit of its estimate of the value of the taking pursuant to section 74.051(2), Florida Statutes (1993).

Cumberland, Hancock, and Mr. Deis were all represented by the same attorney with respect to the eminent domain proceeding. In their answer to the County's eminent domain petition, all three defendants claimed, among other things, that they were entitled to recover business damages pursuant to section 73.071(3)(b), Florida Statutes (1993).

In May 1996, while the eminent domain proceeding was still pending, Cumberland informed Hancock and Mr. Deis that their leases would not be renewed. Cumberland instructed Mr. Deis to vacate the premises by June 1996 and Hancock to vacate by July 1996. After both tenants had vacated the premises Cumberland demolished the building and constructed a larger convenience store with more gas pumps on the property. The new facility did not include any rental space.

In August 1997, the County served Cumberland, Hancock, and Mr. Deis with offers of judgments. Before trial, Cumberland and the County agreed that the value for the land and improvements taken was $70,800, the value of the temporary construction easements was $8,800, and the amount of Cumberland's business damages was $100,001. However, Hancock and Mr. Deis were unable to reach a settlement with the County, and their claims for business damages proceeded to trial. After deliberations, the jury entered a verdict awarding Mr. Deis $85,000 and Hancock $60,000 in business damages. The trial court entered a final judgment in accordance with the jury's verdict. This appeal followed.

The County filed a pretrial motion in limine seeking to limit the evidence of the tenants' business damages to "the term and option periods of the Leases of the Tenants ... and excluding business damage and business valuation evidence beyond the term and option periods of the respective Leases." The trial court summarily denied the motion. At trial, Hancock and Mr. Deis presented expert testimony that they had suffered business damages of $82,627 and $104,745, respectively. The expert testified that he calculated the business damages based on the "past history of the [lease] renewals to try to make a determination how long those business[es] would be staying at that site." In reaching his conclusion, the expert relied on a letter sent by Cumberland to Mr. Deis stating: "[h]ad it not been for the eminent domain we fully expected that you could have continued to be a valued tenant for the indefinite future." The expert testified that he calculated the business damages caused by the County's condemnation by assuming that Hancock and Mr. Deis would have continued as tenants "for an indefinite future as reflected in the letter from Cumberland Farms." The County moved to strike this testimony, but the motion was summarily denied.

The County's first claim on appeal is that the trial court erred in allowing Hancock and Mr. Deis to submit expert testimony that they sustained business damages after the date their existing leases were terminated by Cumberland. More specifically, the County argues that tenants are entitled to recover only those business damages which are sustained during their right of possession and therefore tenants cannot recover business damages for any period of time after the landlord terminates their right of possession. We agree.²

Section 73.071(3)(b), Florida Statutes (1993), authorizes a trial court to award business damages in an eminent domain proceeding:

73.071 Jury trial; compensation; severance damages.-

(3) The jury shall determine solely the amount of compensation to be paid, which compensation shall include:

* * *

(b) Where less than the entire property is sought to be appropriated, any damages to the remainder caused by the taking, including, when the action is by the Department of Transportation, county, municipality, board, district or other public body for the condemnation of a right-of-way, and the effect of the taking of the property involved may damage or destroy an established business of more than 5 years' standing, owned by the party whose lands are being so taken, located upon adjoining lands owned or held by such party, the probable damages to such business which the denial of the use of the property so taken may reasonably cause; any person claiming the right to recover such special damages shall set forth in his or her written defenses the nature and extent of such damages.

The purpose of awarding business damages in an eminent domain proceeding is to mitigate the hardship suffered by a business when the taking of only a portion of property reduces the value associated with the location of the business. See Tampa-Hillsborough County Expressway Auth. v. K.E. Morris Alignment Service, Inc., 444 So.2d 926, 929 (Fla.1983)

. Generally, the business damages contemplated by this statute are "in the nature of lost profits attributable to the reduced profit-making capacity of the business caused by a taking of a portion of the realty or improvements thereon." LeSuer v. State Road Dep't, 231 So.2d 265, 268 (Fla. 1st DCA 1970). Accord Department of Transportation, State of Florida v. Rogers, 705 So.2d 584, 587 (Fla. 5th DCA 1997). However, if the taking results in the entire destruction of a business, the business owner may also recover other damages including those for the loss on the value of business equipment and the value of customer goodwill. See Matthews v. Division of Administration, etc., 324 So.2d 664, 667 (Fla. 4th DCA 1975).

While the recovery of business damages is ordinarily sought by the property owner, a tenant is also entitled to seek recovery of business damages. A tenant's business damages constitute the amount totaling the tenant's leasehold interest in the property. See Sallas v. State Road Dep't, 220 So.2d 378, 380 (Fla. 1st DCA 1969)

. For example, in Sallas, the state road department condemned a 10-foot-wide strip of property on which Sallas operated a gas station. Id. at 379. Sallas had subleased the property from an oil company who had leased the property from the owners. Id. Sallas' sublease was for one year, renewable annually for additional one-year terms, and either party could terminate the lease at the end of any renewal period. Id. The jury awarded Sallas nothing for business damages resulting from the condemnation proceeding. Id. On appeal, the first district reversed, holding that Sallas was entitled to recover business damages for the one-year renewal period, explaining:

The term of the sublease under which appellant operates his business being on a year-to-year basis subject to termination by either party at the end of any renewal period necessarily restricts the

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